Which structure is best?

Discussion in 'Accounting & Tax' started by milkyjoe, 12th May, 2020.

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  1. milkyjoe

    milkyjoe Active Member

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    7th Mar, 2019
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    Mel
    Hi all,

    I have a good little business (company structure) turning over approx 700k and looking to invest in property locally as I believe there is big opportunity here. My business can borrow up to $1M. Individually, the two directors are pretty tight lneding-wise, hence why we are thinking the business is the best to invest and we want to build the balance sheet.

    CGT in a company isn't great though and we were wondering if there is any way to get some SMSF's involved or perhaps a unit trust?

    Keen to hear everyone's thoughts! Cheers
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    a business cannot borrow, as it is not an entity but something an entity does. A trading company should not own assets for a number of reasons and should not buy property.

    What you should use will depend on the circumstances, what type of property, what assets you have now, where the deposit is coming from, what you want to happen with the asset if you die, tax considerations, land tax aspects, who you want to control it etc.

    You should seek legal advice on this.
     
  3. milkyjoe

    milkyjoe Active Member

    Joined:
    7th Mar, 2019
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    Location:
    Mel
    Thanks Terry,

    I think I'm just confused as the trading company is the one who can service the loan. So I'm wondering how it would be even possible for another structure to do this?

    Thanks,
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    If you own the shares in the trading company or control a trust that does etc then you will have income for serviceability.

    You could set up a
    new company, or
    a new trust

    and they could get loans based on your income. The servicing income would be you income, plus you should of the profit in the trading company, plus rent from the new property.
    If your business 'partner' is involved then share share as well will be taken into account.

    One tip is to never let the trading company guarantee a loan in your name or in the name of a trustee. If the lender insists, go to a new lender.